$95.5 million rental deal was inked days before Christie stopped ARC tunnel

A week before Governor Christie froze construction on the ARC Tunnel, the Port Authority paid $95.5 million to rent a Manhattan waterfront parcel officials said was critical to the commuter-rail project.

This corner lot on 29th Street and the West Side Highway was to be used for the Access to the Region's Core tunnel project. The Con Edison yard would have been relocated to an adjacent 2-acre tract the Port Authority paid $95.5 million to lease.

The 2-acre tract — a mostly vacant lot on 12th Avenue at 30th Street — is owned by an investment group headlined by Joseph B. Rose, a onetime top official in the administration of former New York Mayor Rudolph Giuliani.

The payment on the 10-year rental agreement was made as a lump-sum advance; officials said paying the whole amount up front was a cost-saver.

The Port Authority, in response to questions from The Record last week, said the deal for what it called the “Georgetown site” was signed Sept. 3.

Only seven days later, the Christie administration froze all bids and issued a stop-work order on tunnel construction. At the same time, the governor withdrew authorization for a Port Authority board vote that would have cleared $500 million in new spending for the project.

Christie made the temporary work stoppage permanent a month later, citing estimates that the price of the $8.7 billion Secaucus-to-Manhattan rail link could grow by $3 billion or more.

It is not clear how much, if anything, officials involved in the rental deal knew at the time about Christie’s growing misgivings with the project officially known as Access to the Region’s Core.

In interviews and written responses this week, Port Authority officials pointed out that federal transit officials approved of the agreement. They also said the authority had signed a preliminary contract for the site in October 2009 and that breaking it could have brought substantial losses and a possible lawsuit.

Breaking the deal also would have cost them the site, which they said was critical to the project as the best option for relocating an adjacent Con Ed yard that would have been closed by tunnel construction. Both parcels sit where the tunnel was to bore ashore deep under Manhattan’s West Side on its way to a new subterranean station at 34th Street.

While officials acknowledged that they would have preferred buying the property outright, they said the rental deal, which they termed a temporary surface easement, prevented what could have been a long and expensive condemnation battle. The fast-moving and complex project also left little latitude to search for alternative properties, officials said, especially with deadlines looming.

“Without this property, ARC could never be built, so it was essential that we first had to get greater certainty over the property acquisition before massive amounts of ARC funds for the actual tunneling went out the door,” the Port Authority said in a prepared response.

Richard Schwartz, a spokesman for Rose’s Georgetown Co., said the investment group includes the firm as well as other owners. The investment group, which had planned to build a million-square-foot hotel at the site, initially resisted overtures from the Port Authority and the ARC project’s co-manager, NJ Transit. But under threat of condemnation, the owners agreed to a deal negotiated on their behalf by Rose and another Georgetown partner, Adam Flatto.

Schwartz said the Sept 3 closing was set by contract several months earlier and was not influenced by changing political winds that threatened the project.

“At the time of closing, there was absolutely no mention of the possibility that the ARC project might not go forward,” Schwartz said in a written response to questions.

Christie, before officially killing the project, sparred with federal transit officials, who wanted to save the project. The Federal Transit Administration is now demanding that New Jersey pay back $271 million the government spent on the project.

A Christie spokesman declined to comment for this story.

Rose, a Democrat who served an eight-year term as chairman of the New York City Planning Commission and director of Department of City Planning, was an outspoken critic of the Port Authority while working for Giuliani. Calling for an end to the bi-state agency, he argued that the authority was mismanaged and funneled too many resources to New Jersey.

As New York’s chief planner, Rose played a leading role in initiatives such as the redevelopment of lower Manhattan, rezoning of the Theater District and the creation of a 2.1-million-square-foot mixed-use development at Columbus Circle. He also pushed new plans for development on Manhattan's western edge, including extension of the No. 7 subway line.

Extending the No. 7 to New Jersey has been floated as an alternative to ARC.

Rose, who early in his career served as special assistant for urban affairs to U.S. Sen. Daniel Patrick Moynihan, has long been active in Democratic circles. Campaign records show he made $12,500 in contributions to federal candidates and committees in the past two years.

Christie’s decision this fall to kill the ARC tunnel came after cost studies revealed that the price-tag for the 2.7-mile commuter line could exceed $13 billion.